Recommended Weekend Reading
September 29 — October 1, 2023
Here are our recommended reads from reports and articles we read in the last week. We hope you find these useful and that you have a relaxing weekend. And let us know if you or someone you know wants to be added to our distribution list.
Political Economy
“Can Economists Predict Recessions?” St. Louis Federal Reserve Bank Research
When people ask questions about the economy, they often ask about predictions. Will there be a recession soon? When will inflation come down? Why didn’t economists see the 2008 crisis coming? And perhaps most importantly: Do economists have any idea what’s going to happen to the economy? These questions have taken on particular importance recently. In the past four quarters, economic forecasters have, on average, predicted a 42% probability of a contraction in the U.S. economy in the next quarter, according to the Survey of Professional Forecasters (SPF) conducted by the Federal Reserve Bank of Philadelphia. So far, no recession has occurred, although the forecasted risk of a downturn in the fourth quarter remains elevated at 34.4%.
“Did Pandemic Unemployment Benefits Increase Unemployment? Evidence from Early State-level Expirations” Glenn Hubbard/Harry Holzer/Michael Strain, Economic Inquiry
Abstract: During the 2021 pandemic year, the generosity of Unemployment Insurance benefits was expanded (Federal Pandemic Unemployment Compensation [FPUC]), and eligibility for benefits was broadened (Pandemic Unemployment Assistance [PUA]). These two programs were set to expire in September 2021. In June 2021, 18 states exited both FPUC and PUA, and three states exited FPUC (but not PUA). Using Current Population Survey data and a wide range of estimation methods, we find that the flow of unemployed workers into employment increased by around two-thirds following early exit among prime-age workers. We also find evidence of reductions in state-level unemployment rates, increases in employment-populations ratios, and reductions in the share of households that had no difficulty meeting expenses.
Americas
“The Coming Crisis for Latin America’s Left-Wing Leaders” Americas Quarterly
Social democrats now rule much of the region—but anti-incumbency, weak parties, and more may soon make them an endangered species. Despite their sinking poll numbers, they vow to make a comeback. The big question is: What does all this political change mean for Latin America and the markets?
“Americans’ Weak Economic Ratings Slip Further in September” Gallup
Americans’ already negative assessments of the U.S. economy have become slightly worse in September, both in their perception of current economic conditions and their outlook for the economy’s direction. In this month’s update, 20% of U.S. adults say economic conditions are “excellent” or “good,” while 32% call them “only fair” and 48% “poor.” The overall positive rating is down slightly from 23% in August, while the poor rating is up from 42% and is the highest Gallup has seen in a year.
“Tracking Transatlantic Drug Flows: Cocaine’s Path from South America Across the Caribbean to Europe” Center for Strategic and International Studies
This interactive report, with superb graphics, shows that the global cocaine trade has seen seismic shifts in the last decade as drug traffickers looked beyond the United States to set their sights on more lucrative markets in Europe. Cocaine consumption in Europe has increased significantly over the last decade. The rise of cocaine has caused an unprecedented wave of drug-related violence across Europe, especially in port cities like Rotterdam. As drug use has increased, so have drug overdose deaths.
Indo Pacific
“China is Growing Old Before It Becomes Rich: Does It Matter?” Big Data China
In 2022, after six consecutive years of declining birth rates, China recorded its first annual population decline since the early 1960s. According to a forecast by the United Nations, China’s population is set to fall from 1.426 billion in 2022 to 1.313 billion in 2050 and drop below 800 million by 2100. The problem for China, though, isn’t simply a falling population but rather the worsening ratio of retirees to individuals of working age, which will increase the burden on income earners to support the rest of the population. Every estimate and forecast we found (see Figure 1) shows that China’s old-age dependency ratio will continue to rise in the coming decades.
Middle East
“Inside Iran’s influence operation” Semafor
In the spring of 2014, senior Iranian Foreign Ministry officials initiated a quiet effort to bolster Tehran’s image and positions on global security issues — particularly its nuclear program — by building ties with a network of influential overseas academics and researchers. They called it the Iran Experts Initiative. The scope and scale of the IEI project have emerged in a large cache of Iranian government correspondence and emails reported for the first time by Semafor and Iran International. The officials, working under the moderate President Hassan Rouhani, congratulated themselves on the impact of the initiative: At least three of the people on the Foreign Ministry’s list were, or became, top aides to Robert Malley, the Biden administration’s special envoy on Iran, who was placed on leave this June following the suspension of his security clearance.
“Nagorno-Karabakh: The Broader Implications” Carnegie Middle East Center, Carnegie Institute for International Peace
Beyond the tragedy of the Armenians, many countries in the region and internationally have a stake in what happens in the territory. Specifically, Azerbaijan’s military takeover of the region has significant longer-term political and economic implications for Russia, Turkey, Israel, and the EU.
Africa
“Political unrest in Africa threatens global critical mineral supplies and their futures” Peterson Institute for International Economics
The recent coup in Gabon exacerbates the challenge facing mineral-rich African countries, where political instability undermines their development prospects. Gabon is the world’s second largest producer of manganese, which is used to produce iron and steel and is key to the production of electric vehicles. Mineral-rich countries must develop processing facilities that turn raw metal ores into refined, usable products in order to create good manufacturing jobs and expand economic opportunities in the service sector. The Gabon coup is the eighth in West and Central Africa in the past three years, following government overthrows in Burkina Faso, Chad, Guinea, Mali, Niger, and Sudan. But until recently, Gabon had experienced no armed conflict since the end of the Cold War and just one failed coup attempt in 2019.
Map of the Week
While Everyone Worries About China’s Intentions Toward Taiwan, the Philippines Is Where Markets Should Watch Closely Now
Markets have been keenly focused on the increased tensions between Beijing and Taipei but they have not paid particularly close attention to the increasing tensions and military activity on the Scarborough Shoal off the coast of the Philippines. By way of background, in 2012 China claimed the Shoal as their own, redrawing established maritime boundaries. Asa result, the Philippines taking China to the International Court in the Hague. The Philippines won the case in 2016. However, then-President Rodrigo Duterte, as part of his move away from U.S. influence, tried to sooth things with China but with little real effect.
In a reversal of policy, current Philippine President Ferdinand Marcos Jr., who has warmed up relations with the US since taking office, changed tactics and recently reasserted the Philippines rightful claim to the Shoal. He went so far as to instruct the Philippine Coast Guard last week to remove a floating barrier installed by China to block Philippine fishing boats from entering the area.
One critical question the financial market should consider as tensions between the two countries rise is what will the U.S. do? Like Taiwan, the U.S. has a mutual defense treaty with the Philippines.
